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Legal and regulatory challenges for entrepreneurial ventures
The document outlines the significance of political stability, corruption, and regulatory environments for entrepreneurs, particularly in the Asia-Pacific region. It discusses the importance of intellectual property rights (IPR), various legal structures for business organization, and the potential challenges entrepreneurs may face, such as piracy and compliance with regulations. Additionally, it highlights the consequences of environmental regulations and the role of governments in addressing climate change's impacts on entrepreneurship.
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Legal and regulatory challenges for entrepreneurial ventures
- 1. Political instability andcorruption World rank / Country 1 New Zealand 5 Singapore 9 Australia 14 United Kingdom 15 Hong Kong 18 Japan 19 United States 36 Taiwan 46 South Korea 53 Malaysia 80 China 94 India 94 Philippines 102 Thailand 114 Indonesia 116 VietnamEntrepreneurs need to be aware of the potential impact of political instability and corruption. It is possible, but more difficult, to do business in a country with transitory governments or inconsistent policies.
- 3. Chapter 13 Legal andregulatory challenges for entrepreneurial ventures
- 4. Objectives 1. To introducethe importance of legal and regulatory issues to entrepreneurs 2. To consider the regulatory environments of the Asia–Pacific within which a new venture must exist 3. To examine intellectual property protection, including copyright, patents, trademarks and domain names 4. To recognise the important international protection regimes for intellectual property 5. To critically examine the IP practices of Asia–Pacific countries 6. To compare the common legal forms of business organisation in the Asia–Pacific, such as sole proprietorship, partnership and corporation 7. To be aware of the signals that foreshadow insolvency and bankruptcy 8. To examine the trend for environmental regulations that will affect business entrepreneurship
- 5. But first •Have youever had to deal with legal or regulatory challenges in a business? •If you have, what did you decide/do? •If you haven’t, what legal and regulatory challenges do you think that many entrepreneurs might face? •Has anyone ever had to deal with local city councils, the tax office, or intellectual property authorites in your country? •Has anyone ever applied for an internet domain name? •Has anyone had any IP nightmares? ?
- 6. Why is itlocation, location, location? •Why makes an economy the home base for competitive globally oriented entrepreneurs? •What makes Australia a global leader in wine exports? •What made Malaysia a world leader in palm oil production? •How did New Zealand become home for creative industries? •What propelled South Korea into the forefront in electronics?
- 7. Understanding regulatory environments World Bank’s yearlyDoing business index
- 8. Ease of doing business•a • Beingthe ‘best country to do business in’ does not mean there is no regulation. 2015
- 9. Top and bottom In theAsia-Pacific, Singapore, New Zealand and Hong Kong top the list followed by the Korean Republic, the US and Australia all occurring in the top ten.
- 10. Political instability andcorruption World rank / Country 1 New Zealand 5 Singapore 9 Australia 14 United Kingdom 15 Hong Kong 18 Japan 19 United States 36 Taiwan 46 South Korea 53 Malaysia 80 China 94 India 94 Philippines 102 Thailand 114 Indonesia 116 VietnamEntrepreneurs need to be aware of the potential impact of political instability and corruption. It is possible, but more difficult, to do business in a country with transitory governments or inconsistent policies.
- 11. Intellectual property rights (IPR) •Have youever had your intellectual property stolen or violated? •Have you ever used pirate software or movies? ?•How can you protect new products, services and innovations? • The continuing growth of IPR theft and trade in fakes and pirated materials threatens innovative and creative economies worldwide.
- 12. IP theft andpiracy •30% of medicines sold in developing countries are counterfeit. •An astonishing 24% of all Internet bandwidth was devoted to copyright infringement •Unauthorised copying of entire textbooks (including this one) is common IP black market rankings (US $ billions pa)
- 13. • Global piracyand counterfeiting thrive • Thailand’s red zones include Panthip Plaza, Klong Thom, Saphan Lek and Baan Mor (Bangkok) • Large marketplaces selling pirated and counterfeit goods. IP theft and piracy Panthip Plaza, Bangkok
- 14. IP and the entrepreneur •Ideas and knowledge drive the economy. • IP protection a two-way street. –You can legally obtain and exploit IP. Or you can protect it • Asia–Pacific is net importer of intellectual property. • Entrepreneurs need to be knowledgeable about intellectual property protection. This image is the world famous coke bottle patent lodged with the New Zealand patent office in 1938.
- 15.
- 16. Patents •Contract between societyand an inventor •A temporary monopoly on the invention •Exclusive rights to hold, transfer and license •For products or processes that are ‘new, involve an inventive step and are capable of industrial application’ •Granted through registration under national laws
- 17. A general patentprocess •One of the several benefits of the PCT system is that it essentially provides a buffer of up to 30 months during the ‘international phase’ before having to file in individual countries (the ‘national phase’). •Figure 13.1, outlines the indicative timing of these phases.
- 18. ‘an electric lampfor giving light by incandescence consisting of a filament of carbon of high resistance … enclosed in a receiver made entirely of glass . . . from which receiver the air has been exhausted … ‘a flying-machine, a normally flat aeroplane having lateral marginal portions capable of movement . . . so as to present to the atmosphere different angles of incidence, and means for so moving said lateral marginal portions, substantially described’. Examples of a patent specification
- 19. Example of a patentspecification • ONLINE REVIEWERS CAN EARN REWARDS, POINTS AND MONEY FOR WRITING REVIEWS • US 7,788,128 B2: A system for generating a reward for information rendered by a service provider to a user: • means for identify the user, • operator of the system receives a query from the user, • operator delivers a response to the query to the user, • voluntary reward means for allowing the user to provide a first reward to the operator, • value determination means to provide a system rating of the user based upon at least one of the first reward provided by the user, a history of rewards provided by the user, and an assessed value of previous queries made
- 20. Six rules ofpatent strategy 1. Create an IP-protective environment 2. Pursue patents that are broad, are commercially significant and offer a strong position. 4. Prepare a patent plan in detail. 5. Take actions related to your original patent plan. 6. Establish an infringement budget. 7. Evaluate the patent plan strategically.
- 21. Understanding copyright protection •You cannotcopyright an idea, but you can copyright the particular way that an idea is expressed. •This expression can take many forms, including books, music, audio, film, and computer programs. •Extends beyond the death of the author typically 50 or 70 years. •Automatically granted •Each of these rights, or a portion of each, also may be transferred.
- 22. Understanding copyright protection •Must bein a tangible form (written or recorded) •Must be the author’s own work •Before bringing a lawsuit, register with the National Copyright Office of the resident country •‘Fair use’ or ‘fair dealing’ provisions exist •Normal remedy is recovery of actual damages plus any profits the violator receives •Always use the copyright notice (©), although you are automatically protected
- 23. Trademarks •A distinctive name,mark, symbol or motto •Trademarks identify and distinguish goods. •Service marks identify and distinguish services. •Certification marks denote quality, materials of goods and services •Collective marks are trademarks used by members of groups or organisations to identify their goods and services. •A trademark can be a design, like the Nike swoosh. It can be a colour like purple for Cadbury. Levi’s jeans trademark and colour MGM lion’s roar is trademarked
- 24. Types of trademarks •Fanciful: No meaning before they became trademarks • Arbitrary: These are common words that have an arbitrary relationship to the product • Suggestive: Suggestive trademarks indirectly allude to a quality of the product • Descriptive: Describe the goods or service they market • Generic : Generic trademarks describe a whole class of products – examples include Personal computer (for a personal computer) and Milk (for milk).24
- 25. Advantages of trademarking •Givesnotice of the owner’s right to use the mark –It is still recommended to mark the goods or services with the ® symbol. •Protection against importers using the mark •Trademark registration lasts for 10 years. •You need to file in overseas countries • If properly registered, you can obtain an injunction against abuser • A monetary award may be given to the trademark holder in the case of violation. • See more guides in the book.
- 26. Who owns thecopyright to a monkey’s selfie? •Selfie shot by a cheeky black macaque •What did the US Copyright Office rule in the “Monkey Selfie case? Why? •Read the case on p. 471 ?
- 27. Domain names •Internet domainnames are important business identifiers. •‘Cyber squatters’ offer domain names for sale back to the rightful owner •Uniform Dispute Resolution Policy (UDRP) has been accused of favouring large corporations. •Search entire USPTO Trademark Database to instantly secure your brand on the internet. Image: Visualization of routing paths through the Internet
- 28. Trade secrets •Business processes and informationthat are: –unpatentable –patentable but not enforceable –patentable but you do not wish to disclose them. • Trade secrets, such as the formula for Coca-Cola, Kentucky Fried Chicken or WD-40 have been in effect for many years • If the recipes had been copyrighted, the formula would have long been in the public domain.
- 29. Changing IP attitudes •Advancesin technology have opened up whole new areas of patentable products •Technology development is making it increasingly difficult to enforce many conventional forms of intellectual property –e.g. MP3 file-sharing on the Internet. •Responses: –Toughening protection to halt piracy and the decline in revenues and profits for established firms –The creation of new business models such as Apple’s iTunes •Time for a radical rethink of traditional IP?
- 30. Legal structures forentrepreneurial ventures Which legal form is best for start-ups? Why not start out as a sole trader? What are the advantages of a partnership? What is the difference between a proprietary limited and a corporation? Are there tax advantages? What other advantages and disadvantages might there be? ?
- 31. Legal structures forentrepreneurial ventures •Choosing a legal structure is complicated and involves consideration of a range of factors.
- 32. Important factors to consider •Assetprotection –Risk to personal assets •Limited liability –Personal liability for debts •Distribution flexibility –Different types of payment to different participants •Financing –Ease of future financing •Taxation –Minimising tax burden •Business environment –Regulatory approval systems and technological risks •Personal and community relationships –Shared ownership
- 33. Incorporated companies • Hassimilar legal rights and obligations to ‘a natural person’. • Incorporation is the birth of a company; it means giving legal form to a company. Abbrev. Where used Inc. Australia United States LLC Worldwide (not Australia) LLP Worldwide Ltd Australia PLC Commonwealth (not Australia) Pty Ltd Australia PT Indonesia PT Tbk Indonesia Bhd Malaysia Sdn.Bhd Malaysia HUF India PVT.LTD India PSU India LTC New Zealand PTE LTD Singapore
- 34. •Private company (inAustralia Pty Ltd) –As opposed to Public company (in Australia Ltd) •Assets in the event of bankruptcy are limited to assets of the company. •Creditors cannot seize the private assets of the directors •Directors can start new business immediately afterwards. •A Pty Ltd is the opposite of a public company. –Pty Ltd cannot invite the public to invest or deposit money with it, whereas a –Public company can raise capital by offering shares to the public by issuing a prospectus. Private companies
- 35. Private companies Advantages •Liabilities ofshareholders and directors limited to capital share •Company is a separate legal entity •Retained profits are taxed at the company income tax rate •Ease of ownership change •Shares are transferable •Continuity– not dependent on the owners. Disadvantages •Set-up, administrative and operating costs are high •Increased statutory requirements for taxation and corporation law •Revenue and capital losses must be retained by the company – these cannot offset the owners’ incomes.
- 36. Public companies •Shares maybe offered for sale to the public. •Ltd or PLC status is roughly equivalent to a US corporation. •Many float (so shares can be traded) •Statutory requirements on public companies more rigorous than private. Advantages •Those of a private company, plus … •Increased potential for raising finance by share issues or through other investors Disadvantages •Most expensive to set up •More open to hostile takeover •Tighter levels of regulation •Minority shareholders have no control
- 37. Partnerships • Limited partnerships –Capitalinvestment –No responsibility for management and no liability for losses beyond initial investment • Limited liability partnership –Liability of a partner limited to their financial contribution –Common in oil exploration and motion picture ventures • Incorporated limited partnership –Flexible investment vehicles for venture capital and private equity investors
- 38. Sole traderships •Because ofits ease of formation, sole tradership is the most widely used legal form •A business owned and operated by one person (also known as ‘sole proprietor’). •No legal existence independent of its owner. •Individual has a right to all of the profits and liability for all the debts. •Liability is unlimited. •Business and personal assets stand behind the operation.
- 39. Sole traderships Disadvantages • Fewtax concessions • Unlimited liability • Lack of continuity • Lack of personal freedom • Less available capital • Difficulty obtaining financing • Limited viewpoint and experience Advantages • Ease of formation • Losses reduce personal taxes • Less formality, fewer restrictions • Sole ownership of profits • Decision making in one owner • Flexibility respond quickly • Relative freedom from governmental control • Freedom from corporate taxes • Easy to wind it up
- 40. ‘Looking back onit, my judgement was often terribly wrong’, said one entrepreneur who had burned through more than $20 million trying to launch an Internet-based business. ‘Unfortunately, I was never in doubt.’
- 41. Regulating climate change • ‘Asianbrown cloud’ • Trend of CO2 emissions for these countries will continue to grow due to impact of increasing wealth in countries like China and India • Governments have a key role to play in attempting to manage this situation
- 42. First regulated in1987 • 1987: Montreal Protocol on Substances that Deplete the Ozone Layer. • Shows how business can benefit by taking up the challenges imposed by regulations. • Tremendous impact on business –refrigeration and air-conditioners –solvent to clean electronic equipment –a propellant in aerosol sprays –foaming agent in packaging. The largest Antarctic ozone hole recorded as of September 2006 • DuPont alone produced one- quarter of the world’s CFC, which it marketed as Freon. • There are signs that the ozone layer will recover within the next 100 years.
- 43. Just 90 companiescaused two-thirds of man- made global warming emissions •The Kyoto Protocol caps greenhouse gas emissions. •Was an important step, but a dramatic ramp-up is the next big thing that entrepreneurial businesses must tackle. •Nearly two-thirds of historic carbon dioxide and methane emissions can be attributed to business such as Chevron, Exxon and BP.
- 44. Stay tuned forfurther developments •The United Nations Framework Convention on Climate Change and the Kyoto Protocol embody the principles of multilateral response to climate change •All participating countries pledge action to reduce greenhouse gas emissions. •Intergovernmental Panel on Climate Change (IPCC) confirms that climate change is a real concern and that human activities were likely to be contributing to it.
- 45. Stay tuned forfurther developments •Expect policy and regulatory environment to produce such policies –introduction of carbon pricing schemes –support for research and development in zero-carbon technologies and processes –mandatory energy efficiency standards –raising investment in network infrastructure such as public transport systems and smart electricity grids.
- 46. Key concepts (close yourbooks) 1. How can you protect your intellectual property? 2. What are the legal forms available for entrepreneurs structuring their ventures? ?